McKesson Will Merge IT Unit with Change Healthcare, But Deal Does Not Include Paragon EHR | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

McKesson Will Merge IT Unit with Change Healthcare, But Deal Does Not Include Paragon EHR

June 28, 2016
by Heather Landi
| Reprints
The deal to separate its IT unit apparently does not include its Enterprise Information Solutions (EIS) business, a division of McKesson that provides core hospital information systems such as Paragon.

The speculation swirling around whether McKesson would separate its IT unit is now official as the healthcare services provider and Change Healthcare Holdings announced Tuesday the creation of a new healthcare information technology company.

According to an announcement, the new health IT company will combine “substantially all of Change Healthcare’s business” and “the majority of McKesson Technology Solutions businesses” into a new company. And, according to the announcement, the new company will have total annual revenues of $3.4 billion.

However, the deal to merge McKesson's IT unit into a new company with Change Healthcare apparently does not include its Enterprise Information Solutions (EIS) business, a division of McKesson that provides core hospital information systems such as Paragon.

In a separate announcement, McKesson Corporation stated it was “exploring strategic alternatives for its EIS business.”

“We appreciate the critical importance of the electronic medical record (EMR) and other core information systems to the success of our provider customers,” Pat Blake, executive vice president and group president, McKesson Technology Solutions, said in a statement. “As we embark on building a new, EMR-agnostic technology company with Change Healthcare, we believe that it is in the best interest of our customers to identify a strategic alternative that will allow for more focus on core provider information systems. We are committed to supporting our customers as we evaluate these options, ensuring a smooth transition through this process.”

Nimesh Shah, president of McKesson’s EIS business, also said in an official statement, “Exploring a new strategic path forward for Paragon, OneContent and our ERP-related businesses provides the best opportunity to accelerate our ability to meet our customers’ evolving needs. While we evaluate the best options, the overall priorities for EIS remain unchanged, and we will continue the many efforts we have underway to serve the long-term interests of our customers.”

McKesson’s EIS serves hospitals and health systems with software solutions, managed services, and infrastructure and hosting services. The portfolio includes core solutions such as Paragon hospital information system; STAR and HealthQuest solutions for revenue cycle management, financial and supply chain management; OneContent document and content management; and coding and other professional services.

McKesson also stated in the announcement, “There is no assurance that this evaluation will result in any transaction being announced or consummated. McKesson will not disclose further developments during this process until its board of directors has approved a specific action or McKesson has otherwise determined that further disclosure is appropriate. EIS is reported as part of our McKesson Technology Solutions segment.”

As previously reported by Healthcare Informatics’ Contributing Editor David Raths, health IT industry watchers have been speculating that McKesson might sell its acute care IT business since the company sold its ambulatory electronic health record (EHR) assets to e-MDs back in March. This move signaled, according to some industry professionals, that McKesson could be looking to exit the acute care space as well. That speculation ramped up earlier this month based on media reports citing inside sources at the company that McKesson was weighing a separation of its IT unit.

McKesson is a global healthcare services and IT company with a substantial pharmaceutical distribution business. According to the Healthcare Informatics 100, which ranks healthcare technology companies based on their 2015 health IT revenue, McKesson Technology Solutions ranks at No. 4 with $3.1 billion in health IT revenue. The company fell one spot from No. 3, where it ranked in 2015 with $3.3 billion in revenue. McKesson’s technology solutions business also consists of RelayHealth, a provider of online physician communication services that McKesson purchased in 2006.

Nashville-based Change Healthcare, a provider of software and analytics, network solutions and technology-enabled services, ranks at No. 11 on the Healthcare Informatics 100 this year, with $1.47 billion in revenue. This year, the company jumped up from the No. 12 spot in 2015 when it reported $1.35 billion in revenue. Change Healthcare is currently majority owned by Blackstone Group LP.

The companies stated in the announcement that McKesson and Change Healthcare will own approximately 70 percent and 30 percent, respectively, of the new company and will receive cash proceeds of approximately $1.25 billion and $1.75 billion, respectively, following the close of the transaction.

The new company will be jointly governed by McKesson and Change Healthcare and is expected to generate in excess of $150 million in annual synergies by the second year following the close of the transaction, the press release stated.

“The new organization brings together the complementary strengths of McKesson Technology Solutions and Change Healthcare to deliver a broad portfolio of solutions that will help lower healthcare costs, improve patient access and outcomes, and make it simpler for payers, providers, and consumers to manage the transition to value-based care. As a separate entity singularly focused on healthcare technology and technology-enabled services, the new organization will be positioned to better respond to customer needs and deliver next-generation innovations,” the companies stated in the announcement.

“This is a bold, innovative transaction that creates a company with an enhanced ability to help customers address their increasingly complex financial and clinical challenges,” John Hammergren, chairman and chief executive officer, McKesson Corporation, said in a statement. “The new company will establish a more efficient suite of end-to-end payment and claims solutions, as well as clinical capabilities, while unlocking the value of our MTS businesses in a tax-efficient manner.”

“The combination of these two entities comes at a transformational time in U.S. healthcare,” Neil de Crescenzo, president and chief executive officer, Change Healthcare, said in the announcement. “Together we will create significant value by bringing together complementary capabilities from both organizations to deliver innovative new solutions for customers, create opportunities for team members at a leading healthcare technology company, and drive advancements that address the three critical areas of cost, quality and outcomes across the healthcare sector.”

Neil Simpkins, senior managing director of Blackstone, said in a statement. “The innovative track records and forward-thinking experiences of both organizations create a truly unique opportunity for positive impact across the healthcare ecosystem.”


Get the latest information on Health IT and attend other valuable sessions at this two-day Summit providing healthcare leaders with educational content, insightful debate and dialogue on the future of healthcare and technology.

Learn More



ONC Roundup: Senior Leadership Changes Spark Questions

The Office of the National Coordinator for Health IT (ONC) has continued to experience changes within its upper leadership, leading some folks to again ponder what the health IT agency’s role will be moving forward.

Media Report: Walmart Hires Former Humana Executive to Run Health Unit

Reigniting speculation that Walmart and insurer Humana are exploring ways to forge a closer partnership, Walmart Inc. has hired a Humana veteran to run its health care business, according to a report from Bloomberg.

Value-Based Care Shift Has Halted, Study Finds

A new study of 451 physicians and health plan executives suggests that progress toward value-based care has stalled. In fact, it may have even taken a step backward over the past year, the research revealed.

Study: EHRs Tied with Lower Hospital Mortality, But Only After Systems Have Matured

Over the past decade, there has been significant national investment in electronic health record (EHR) systems at U.S. hospitals, which was expected to result in improved quality and efficiency of care. However, evidence linking EHR adoption to better care is mixed, according to medical researchers.

Nursing Notes Can Help Predict ICU Survival, Study Finds

Researchers at the University of Waterloo in Ontario have found that sentiments in healthcare providers’ nursing notes can be good indicators of whether intensive care unit (ICU) patients will survive.

Health Catalyst Completes Acquisition of HIE Technology Company Medicity

Salt Lake City-based Health Catalyst, a data analytics company, has completed its acquisition of Medicity, a developer of health information exchange (HIE) technology, and the deal adds data exchange capabilities to Health Catalyst’s data, analytics and decision support solutions.